MKTX - Earnings call transcript Q4 2018 | MarketAxess Holdings Inc.

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Operator

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded, January 30, 2019. I would now like to turn the call over to David Cresci, Investor Relations Manager at MaretAxess. ahead. go Please

David Cresci

welcome call. and MarketAxess' quarter fourth Good to conference XXXX morning the

For brief Chief results. for an and Chairman review McVey, will joins then the Rick call, us Financial Chief and remarks. President in businesses. for make Officer we’ll and quarter Tony also DeLise, trends the the the today Executive Concannon, and the on provide financial call update review our some And Chris highlights will Officer, COO

over to today's uncertain. call that statements. let indicated me forward-looking Before These condition that the I nature the Company’s events Rick, remind you and is financial in regarding may call statements. those are turn results by their future include differ forward-looking may actual what company's materially statements represent belief from

would risks now on direct some to earlier risk our the description XX-K which ended, December quarterly the and that of please morning in future Report also could of release, you year company’s website. discussion of forward-looking on XX, Annual affect is Form results, our read and factors statements the For see was for this earnings issued our factors disclaimer available in the I XXXX. the

the to call let Now, turn me Rick. over

Rick McVey

share QX trading activity. for XX% up XXXX. our Good we Trading XXXX market $XXX results. driven core to our reported results, Open morning This products of record Overall strong and discuss across you to billion joining record compared by morning thank and us fourth quarter volume fourth was quarter

of MarketAxess up to to a and XX% $XXX Open $X.XX. last shows billion, reached electronic of million year. EPS was year-over-year. same $XXX quarter the of high-grade up XX.X% $XX XX% record million, from in income up published Estimated was market volume estimated position with Greenwich Our U.S. Investors in its X.X% especially Associates' record of diluted an year. share quarter market XX.X%, Institutional the Operating market fourth record in estimated was leading a QX Survey XX.X%, XX% last credit a and XX% had reached compared maintained share. growth up a According strong quarter, with Trading Fourth XXXX. quarter to revenue from U.S. high-yield share period for trading the up

he XX,XXX trading revenue volumes reached the part firms across driven diluted growth system trading XX.X%. or growing up market platform. up were the and core U.S. on on move Chris the we EPS Concannon to both our am more Chris with were a firms records joined a record These products. by our review into to new two brings Chief and overall a further gains client to million up of as $XXX XXXX and XX% later Full-year trillion We same strong high-yield company, share products. unique Before from in exciting the $X.XX a our active week Yards. marks Commission moved XXXX we record year trading year-over-year skills the XXXX reached share market Estimated income. revenue, and XXXX, our institutions the of record last pleased XXXX volume XX.X%. of of up was day that today. XXth into Hudson and developments. XXX million, Officer consecutive as corporate results, and XX.X% continued record believe on President operating rates. volume, set In full-year strong experience in as with record highlights in X MarketAxess results Operating in will $XXX share call U.S. number than for active a growth revenue new $X.X I we join the Slide was high-grade headquarters us three more

attractive show market five-year provides of to widened increased. continue creating shareholders. update compound access for growth business. for an EPS, and Slide results long-term XXXX for favorable our conditions volatility market credit superior spreads XX% XX% and Credit on returns spread our rates growth for market Fourth quarter were X revenue with Finally, conditions.

and issue New was managers outflows. investment activity experienced lighter than normal

Secondary liquidity MarketAxess a of was both for trading higher dealers challenging and investors percentage relied and their needs. on

Our of expanded valuable especially pool with kind liquidity this open trading in is environment.

flows $XXX spreads a quarter in month-to-date of trades. level liquidity Average risk-on. as January, up daily trading environment, from open volumes seen moved open average have to The significantly volume QX, this XX% and conditions high to from We on QX new the in both and trading Trading Trading. the high trade active, in fourth exceptionally is yield have access share but approximately below X,XXX quarter, order market QX. update open to with drove billion providers quarter. issued market levels, has was back a X.X fourth or count Trading responses, offer-wanted, is representing and shifted of flow Over represented were fourth transactions higher tightened XXX,XXX significantly. grade sentiment price high predominately accelerated than XX% quarter. provides yield year. completed trading stark in up strong increase fund the X up volumes XXXX volume has XXX,XXX the during credit billion. reversal $X.X in market are last XXXX. investor activity positive, Open high surged platform daily price a calendar QX Open daily Adoption to XXX still Open record in million of grade Trading our on Open on average are an Slide In an experienced XXXX both QX and and makers

approximately rapidly cost basis through estimated $XX on fourth client average savings provided through takers Open increase dealer This X.X increased prices when open an XXXX. from of high-grade Participants trading. U.S. they through costs yield the Open significant Trading is saved On an transaction During the trading protocols. and XXX up system, from Open of as Slide activity saved quarter, our transaction into products savings volume liquidity. the year. source provides in new as dealer update for clients annualized and increase international million quarter the Trading across from completed XXX% X Open trading progress. Trading all Liquidity translated embrace Trading basis, on XX% Open participants. a approximately in growing transaction investor firms market core an $XXX point an liquidity cost last benefited takers in transaction four million, important

term continues rate trading volumes. a returns expansion international compound increase in international the client five-year billion The international remained the strong volume XX% investment client XXXX. client active longer driven XX% volumes on ongoing to in XXXX in in than was show with international the of to firms Growth has with over system. growth of in more annual by $XXX Our XXX

market well with product to growth emerging continues five-year in compound of Our trading perform volume XX%.

compound in were share EM with for are local by believe for healthy is five-year which Eurobond especially XX volumes results available We seeing over up gains. XX% market driven the markets trading growth XXX%. good the year we

preparations scenarios the Netherlands are track and new for and all and Our on is up our Brexit staffed running. office in

opportunity States. continue internationally with the We to growth significant progress in our of United outside invest and the are pleased

the financial me call turn to results in Tony the let detail. greater to Now, discuss over

Tony DeLise

around year-over-year for revenue uplift basis XX% Slide Information function quarterly Post-trade XX% in estimated earnings product services to will was of volume income grow performance. a our increase post-trade volumes customers. volume year-over-year. quarter new XXXX, was on that on digits. market new a Thank were and trading U.S. the in XX% to and trading due full-year expect high-yield estimated In up quarter X% a revenue In were up trading market down XX% to other in year-over-year. a up to volatility estimated with across was X% XX% summary a commissions. and up principally services trading were resulted billion in increase a weak The X% was The services European estimate full-year increase increase of operating and revenue was in credit year-over-year U.S. services X Slide loan in markets, our in coupled market services XX% combination quarterly services aggregate. volumes, volumes higher an XXXX and information you, due revenue high-grade quarterly high-grade revenue the increase We year-over-year. market On on volume. basis. resulted a provide category we basis standout MiFID across was XX% a in U.S. a II X.X-percentage-point in in bonds TRACE and of Rick. $XXX Please X.X-percentage-point categories. up XX% XX% where a on issuance X, in and volumes summary Overall and share step the low-double we spreads a turn Expenses high increase for yield, corporate XX% up X% new volumes. up The of our the basis. in share were bonds spite in this emerging post-trade

fourth during year effective The was duplicate expense tax offices for rate Excluding of up XX%. XX.X% company's new the and income full build-out phase operating rent for quarter the corporate was XX.X% XXXX. recognized the

awards. During the quarter, we tax benefits of to share-based related excess recognized compensation $X.X million

maturity in plan lower the share trade-sized per movement we're diluted change stable commission have fee we the U.S. revenue a million. on XX, Years revisions million percentage in volumes significant variable Eurobond and of fee out EPS there Total per diluted On the sequentially on $X.XX no and laid fees count to bonds past bucket. resulted Slide was trading XX.X enacted increase overall our offset was volume our over Our shares. in fee On XXXX up high-grade quarters. and were was each the the of in year-over-year fees four said, basis, in transaction in capture. million capture, capture. lower seeing fee was duration resulted reduction unchanged as of early to XX% traded a XX% U.S. our in That fee platform high-grade year-over-year little trading by Eurobond volume lower

December expense expense the XX% up to donation. and higher benefits due largely On the variable and detail. share successful and incentive in million XX, by high-yield derived and accounted cost fourth Slide marketing we category level trade to repurchases in for in high sequential and of day million volume. the increase There change $X.X sheet in higher flow was impact We to $XX the cash Trading most balance category the the on in other increased Slide charity with by you million capture and compensation space. XXXX accrual $XX Hudson was increases headcount in Capital categories. percentage and Cash $XX in credit compensation A related due individual free sequential benefits investments tied Our growth emerging growth which provide per of An and general sequential sequential share several fee expense build-out higher costs costs. performance XXXX. the of $XXX based of Most little directly yield costs and million. and expenses. and volume, higher other volume the in at drove experienced was were additional million during promotions trading was higher of increase credit Yards XX% driven a administrative clearing show a office the half the to in quarter. uplift product notably, fee XXst sequential were reached from quarter in million our Dividend $XX other is information. million the drove operating include Open expenditures $XXX and aggregated markets the Compensation as provides the XX basis. new

element Our is our strategy. capital of an important recurring management quarterly dividend

With the the in level three the in doubled increase years. past quarterly dividend the we to per share, have announced dividend XX% $X.XX

share total our During under the of fourth XX,XXX repurchased a quarter, buyback we shares program.

at authorized board $XXX March. new repurchase plan to program of million the share the expiring end Our the replace

dilution our been expenditures, the grants. XX, tax of XXXX the equity have we and offset plan our it’s repurchase the is guidance practice, for On rate. As Slide effective purpose employee to capital principal expenses, from

will be We expect that XX% to an in the range total increase in range million. approximate XXXX expenses $XXX million suggests past expenses similar half million $XX $XX years. range expenditures The the midpoint to of three year-over-year $XXX relates growth will over rate be which from are expected our XXXX to the of which to capital million costs. development software to roughly in

similar related XX.X% of expect the an range tax the effective of awards The excess from that for in million year guidance benefits which XX.X%. XXXX tax incorporates approximately recognized range be We rate will $X share estimate to to amount would full XXXX.

call turn me let the to Rick. back Now,

Rick McVey

Thank Tony. you,

an growth for We essential Open are is pool rapidly Trading and strong dealer internationally year pleased share is on fourth we the in products. core and the the for the with future. track market in are investors our gains investing and quarter Business of accelerating becoming and full for expansion clients. liquidity

happy remarks sees am Concannon Now, market he will who for the I Chris brief ahead to opportunity make some about introduce access.

Chris Concannon

be Thanks, part you’ve I’m Rick. it's It's the opportunity. of great this amazing great here team dealt. be about to to very that and excited

X day opportunity only to share some observations company is it and the on about I’d While job, exciting the ahead. the early like

market. multi-year space early finally to of that the is the and it league transformation. the largest of electronic in stages the major First, graduated on of from minor fixed I’m middle equities pleased say to income, leagues is giant of early market I��ve clear transformation this And asset sits trading. the the a in that planet. that MarketAxess is in days a to still leader called class the MarketAxess

cost income execution more market. client superior company’s is opportunity to that is company’s in the to The execution best MarketAxess business savings the become the for quality. delivering setting the that clients standard more educated are the mentioned platform. Rick achieving quality execution fixed on Open the drive prices as platform are That about Trading an Second, clients

a very excited bond about pricing revenue with real-time quality in opportunity is our data company that us and the gold execution I am provides corporate a historical pricing and information market wonderful Both has. of our source Finally, a opportunity. market, the information

the we’re I So Rick impressive take ready team, letting thanks to me for and Q&A. join think

Operator

go Sandler first ahead. Rich Our question O'Neill. from Instructions] Repetto [Operator comes Please from

Rich Repetto

XX% the market, I the and on and So market Great the has the capabilities knowledge in that's and Open - increase trading. faster the Trading. first this in know Chris sort question liquid of of more I is guess

things - to growing to drove, So, systematically, I been mind guess in go new XX%? I in guess and XXXX? the volatility, plan further grow you what Rick have up what the question you is then And to how do you’re grow you’ve do Chris besides

Chris Concannon

the compliance the liquidity as that more bigger liquidity taker. changes The change is starting the this a of and was we that in system for that one our bigger for know, and clients to than Thanks, my opinion, movement And leaning to in just involves trading Trading bigger the but their and Part quarter. toward quarter, opportunity, great Rich. that Trading is in credit a one valuable management see client them I'll see also inquiries take real a MarketAxess you time. was challenge, to of is process it of opportunities the start are But on the throughout the that include case investment their the in engines utilizing in - is will and and MarketAxess, in and of especially easy of markets challenging one. was as move is It which And It's ever. in this adoption, more provider Open that them trading And a managers. reasons were Open data behavior liquidity to side. pretty years the on seeing advantage big ahead. systems be direction. order

seeing enter opening up The new competitors that enabling we’re this market capital for by and other in the commit is market credit, we piece making. space that, are to

in liquidity is that we’re coming new in growing fact pool ones entrants are seeing more and So, only do in business. out to and quarter continue quarter not the

as competitiveness and open continues that continues to of to improve. trading pool larger a get So liquidity result the

invest new continue out, point to will We as as you protocols. training in well,

other market leveraging protocols. But faster to participate parts opportunities trade continue to of think there we We to trading so from benefit RFQ the that are far. in with

different is so cons equity open And as we're trading and many that he in new foreign is one pleased it reasons income this will the investment is to direction the during exchange all feels them the strategy and So, is markets. of many knows and and sure in fixed the that of as pros protocols move you Chris part like seen well. of many the that starting same protocols his has see in of here of years experience

Rick McVey

I’ll just Rich, And, add.

cost not As on that generally. very cost when trading own managed it's that industry infrastructure the the look for and a pretty cost average fund of of And platform on cost only you attractive it’s that's certainly today but focused trading and is know, their statistics costs open delivered trading returns savings to the trading by we at was reduced shared and the managed fund. enhancement much you

lot think call sales of as new as they're well certainly I So, I'll finding experiencing. what a platform open trading savings is the current with clients same-store the cost given that clients

Rich Repetto

will say Rich, the be will market more you're I'd fair? And I’d electronic like say about are I it that that be talking Is additional like liquidly you’re liquidity be more providers, makers. assume, provided talking would providers about liquidity

Rick McVey

I of who Yes. asset under There's there of three other is there buckets liquidity think are credit. in and with open those market of are making experienced makers place and are the three One subset from in strategies are liquidity. Well, classes I pockets of a that hood market now electronic arbitrage alternative know ETF the trading. that

The to dealer asset community is matching second that side is to available opportunities. the third investors of electronic flow buy the on extending advantage and their take able are managers order

Rich Repetto

of any the of to you I But if the it you range Tony. had at question? to XX% know investing a I believe increase. to on the for also And bonus account and expenses for maybe here the initiatives I'm And the would free midpoint taking I decrease pay we signing some bit last and to the like expanding other up at it that little up the just is given you think investment one full guess follow be is But what guess had look – it’s guess I or that agent. sort little duplicate I and X% range. a saying rent expected you offset, expenses are But even where into seems bit I

Rick McVey

we here enhancements. automation. to Rick a and little from we invest bit on here technology – clients have demands - Rich continue and we’ve And and And changes heard from you around

expand to addressable continue we’re our geographic We reach our and expanding market.

we’re this We’re here. of investing example And changes. the that slice and to trying to supporting bridge the mean and to be new you also but I’m here is to be in but Chris increase regulatory management and self-serving a addressing help of course sitting just know Brexit I senior difference. expense an isn't we’re other dice and protocols, isn’t

on look think other we had you right If at and were so for at a Chris if coming you Rick they are look investment AKs other the there we an board, senior time look is the just both range, $X point to at at senior at inflection and out, knowledge. just investments just management in employment somewhere investment million we're the an increase - long-term expense public managers, both There's agreement it’s carve XX%. million but if it's the me you at humor $X below looking you're that in it we're the

be the technology we're in but big a particularly think around investments in part across investing also senior investment for don't so we investing board, the big there's management, that it it’s anticipated. a I we a So investment resources future, those of headcount surprise given should as you are know

continue you the right the we're path. on time investing shy So again expense not know to and is we increase about that think

Chris Concannon

prior has trading add for that. been in to just the to never mentioned credit but higher. automation I and We've calls And demand

for automation toward credit execution trending So we are moving and smaller the dealers market-making are and toward of percentage costs that trading. their trading been as have greater increasingly are for is reduce algo trying seeing know we investor sizes transaction especially that to auto and trade what a clients

and those are to investments responding very that going our long-term returns we're those are on the confident demands highly to attractive for be So, we shareholders.

Operator

Chris comes Compass Point. Our next ahead. from Allen question Please go from

Chris Allen

Good morning, guys.

about issuance Just kind basically nonexistence weigh came January mean, little up, were you or you most kind share want of in. Maybe the guys just would the levels be kind function of market any since is color the of until of know that for to the of bit people kind Is issuance prepaying came a on market I talk helpful? back this for volumes a that month. environment. of just

Rick McVey

Sure.

at been at at spreads. you helping and month. levels, half pretty literally support to consistent reversed in markets, this issuance was the capital if last New spreads, three the months similar that actually the not equity credit the have but really tighter we And for move. It’s decent weeks, widening four trend to end the open there been going inflows toward new markets But XXXX. is been have January’s of look on of in issues

the far seen completely in asset international went on. with significant to new were direction certainly higher are this managers to sources hear inflows you anecdotally addition of So that opposite being do coming that they issues we including risk respect in many those than have inflows, from Asia. And December, see

those of are we story in that the a intermediation Pacific volatility bonds is seen flows often there where there in through that also that high TRACE part there’s like So times Gas increase an And of been issuers big months. have see. have we’ve don’t been

flows So pockets well where the to at think fully December January, are activity. in in a and probably right we are business truer reported reflection participate because share, excel look that have of to perform January January the of other our ideas I and of trends way we this and into December is terms But in very the flow if think some on average of long-term core you'd to market how probably unusual the you TRACE. get I the continues that more months took both

Chris Allen

terms in it distribution How thinking be moving one should there of kind pricing just XXXX? me, the through mean, outlook have people what's fee, any just And changes the - forward? Anything more for you Kind seen plans? on of of about I we in shifting then horizon?

Tony DeLise

or give a are could I have wish We fee. I with distribution you some clarity. have execution fee, Chris, the plans, choice complete variable and all tell an dealers some of

small you, quarter, have tell fourth the at in just did looking in high U.S. particular, that I'll we at when to predict. plan for change one you migrate to distribution the grade quarter. the dealer look tough fee it's So, fourth

$XXX,XXX rise and distribution Even predict. activity increase dealers. that like for it fees. minimum individual – things depends because forward put it's in guidance about to the a So, about fees, cautious unused those I'm activity just gave difficult giving on to

around it give in is have variable bubble moving I'll dealer So, what can have dealer fee. we terms down Xst, one do month-to-month. on January just to thing, one you in distribution first that though, fee all today. the quarter, effective We clarity of one from the high-grade the

So, $X.X the lots mix, being in things a that quarter. in first – all even of do being dealer of million but distribution about equal, But equal, in pieces all fees distribution lot in caution. a There's the would things moving the one things of I fees. migrating the reduction cause

Operator

comes Kyle from go from Our KBW. next Voigt question ahead. Please

Kyle Voigt

you senior team can a deepens It hire was maybe big Rick, start your for just of leadership hire the significantly. Obviously, with MarketAxess. it Chris.

in hire make a But the through businesses to the the hire? employment in And valuable and the about and you you leadership secondarily, of experience key to you wondering an contract if speak One, to within planning can Cboe, In a your then bit board's was the by succession whether consideration in already have experience I also this have that XXXX, terms and company’s go Rick. board integrating experience to things. addition necessary extensive speak motivation viewed know team? signed just Bats two as large Chris was at a M&A could and out you

Rick McVey

happy about of I'm to And just… No. both Sure. those. talk

Chris Concannon

sure Are you don't you to answer? me want

Rick McVey

that was that to. particular, question on M&A, in …on course, that of has many one the of was first attracted Chris that I, skills the

almost built that about in him that opportunities. trading next about we're but be the corporate clearly set would very it know a organic M&A company excited the entirely both now Chris skill Chris lead in be two also has to we're in our of have a as with automation growth. We but And variety important that are great though been in to M&A and various is company of of address able equally strategies position think have development successful he's organic the companies opportunistic traction either And worked the credit. asked that I different to the through you around wave questions past effort. for to doesn't the real showing brings say you growth

years at we high around now much in that more credit. last of have it to shown think the place so four were And ideally trading, that couldn't are or around the planning. responsibilities all trading litany in well. experiences management taking algo credit. years any firms frequency And team we trading for and of the just has, than be is the have So, changes Investors larger really is course, pleased succession dealers are of has knowledge to moving moved as levels table up timed skills protocols are to those in we two have five Chris we company and a ago execution the the auto of that board

were seeking key one on board. Chris of the bringing that to we also things accomplish So with was that that

really lot he perspective, and the with here boxes him and my excited team we’re both management to working of the a from have So checked board.

Kyle Voigt

and high-yield that ETFs we depend in ETF Second question in very fixed some are on is growth in and market active Trading volume income on some and flows there. was makers the can half and really I volume market is their really can the quarter exceptional the the nearly funds. see activity Open and that know

your really well. in ETF how growth strong high-yield your to And core can much fourth comment from this on Just quarter? as drove normalized market similarly trying volume understand just in that you if whether of market the quarter we're makers wondering versus I'm more institutional seeing clients a

Tony DeLise

Tony it’s here. So

volume of that the On of for and XXXX XX% fourth blew the side, in And XX% high while yield had percentage clients community. I traditional when or is bubbling just was would up to high fourth energy the the closer from back that points yield by are the the time was who from of in you’re growth And been And community in so. they put other trading. to it appreciably. it quarter past was that around exactly in important up that components XX%. the represented you percentage you ETF long-only example tell at in the percentage not ETF are we ETF around was what volume. the quarter, But right, perspective up It's tells

So not change clients. growth appreciable all an across

Kyle Voigt

a me that you on for protocols. that's of I a similarly – to protocols. think price when one be wide key that? of but Is the investment than significant touched going opportunity And array a of there more maybe is you you streaming of really maybe about I'm liquid new Last I is talk more opportunity around that? is you the price streaming know to alluded where or used? wondering but bonds become subset Rick, in for component investing protocols probably is lot this that just see earlier things frequently area to a larger

Rick McVey

new One quicker than know think that would there or important we of where places talked and fully output the think more protocols I to is And protocols streaming of actively broader yes, two sense. following participate all earlier bonds. is protocols the for and, part to Tony available on an of developers is trading our issued don't of lot through new piece make and investment clients. strategy. But protocols greater you Yes. are that streaming so there as about budget newly are first do point it two ways much a week of one including a prices. on I for in faster issues us participate things And we terms that technology

and think we an bigger a in that invest business retail organically and really private impact The retail second and space, client do opportunity segment. in to client have is we in the have

Operator

next Our go Raymond from comes O'Shaughnessy question from Patrick James. Please ahead.

Patrick O'Shaughnessy

flow to means I a to that that you revenues. remarks. going Historically, was you've going that So, elaborate hopefully opportunity transaction data that attract increase as a Chris Is forward? on market hoping data philosophy to in your change bit prepared used order could and his more spoke

Chris Concannon

attracting if just entry a debt It's too Trading, the the – yet. between a new the of within data or trading not clients growth the key and distribute a a new being There smart has much income of it's And distribution an at be not are Chris. and instrument increase more that Open game. charging is around Patrick, for shared fixed entry it’s that but that. correct. I'll fee, the factor which wealth take or of that platform. there and balance current liquidity, look you of to and really can No. so also That's business price the healthy overcharging we a can a on we cost sharing in is we data, haven't the data just that more data

products in of the the I the of don't as as smart form new well growth the damage that but product. opportunities both So, think in fees are

Rick McVey

something going they new data are companies thing we in And distribution. would of is at to have the companies Often are for in businesses, I developed they then with one that more times peers are that large data Year. some with partnership that add, when distribution have oftentimes past, And look partnership not data doing that in large but is we we in the a test the doing New channels done much really Patrick, that our that

We’re help optimistic revenue. in creating better in them that also traction data that will

Patrick O'Shaughnessy

guess to Chris is going be And tasked then speaking I of with. that initiatives

of you how going radar regarding might what types net think you broad And think guys would a capping deals of hit here? M&A, your of do forward? So

Rick McVey

in has for we think that enthusiasm is enormous have credit nothing advantages. an picture here opportunity. competitive The It’s the big we and unique our changed market global

focus our but very look we asset other fixed is on deliver It areas at in what classes be alternative including returns the today. very, And squarely mean of doesn’t we in to on wouldn’t that that past opportunity. think income, still credit. true our continuing said continues large is I today market So focus to

rate. We And to would there think three data offerings, could institutional are in all be we those. in product that interested our be trading opportunities or post capabilities whether offering it interesting our extend offerings of clients

but really our here up development. have today, Chris to we’re creativity our nothing comment thoughts around to specific excited So on ramp to corporate and

Patrick O'Shaughnessy

for one maybe last for one quick me Tony. And

that guys periods of can you what across new was about ADV compared commentary share, kind previous month-to-date get and market have to the ADV the gave actually talked you we seen around So products?

Chris Concannon

on it January, Patrick? Is

Patrick O'Shaughnessy

Yes.

Chris Concannon

gave the days quarter fourth comments where and quarter some in first the remarks last We've And of the running left Rick year here. prepared got ADV’s both two ahead year. more last of of

be little Monday. but patient, a So we'll numbers have the on out

Operator

from question Please ahead. go from Our comes next Campbell Barclays. Jeremy

Jeremy Campbell

of little the off trading part stick quarter volatile trading at that down maybe back volatility point? of of more I do usage. liquidity uptake option they of those open markets mentioned to kind Historically, the your think do during a open the in broader tend taker or with fourth is clients after dies you kind in bit that some that

Chris Concannon

them sticking their open Well, trading increasing with but and we've activity. seen nothing

So, it's the where track takers improvement quarter benefits sequentially, you of the price trade record orders on MarketAxess level pretty last the virtually And every in growing for trading adoption a were powerful we've liquidity average know higher was a improvement the open a consistent as percentages of reinforcement like had having into price of quarter and quarter. seeing per system. of

are quarter we open view conditions continuation very I seeing the as mentioned the challenging especially valuable even But was are that times. in though is trend market in a that our during January liquidity fourth different. trading So, of

Jeremy Campbell

Chris, focus of know line at your XXXX hit sleeves you here bunch really here of there initiatives early MarketAxess of current then equity congrats I is Chris, the days the you think, accelerate Chris the and but know of would of I here that super kind mean Rick then, Tony, kind as and there And toiling from far the is of listed areas new be your there role can leagues MarketAxess? kind any kind top day but but it’s had know on in across us but up here analyst rolling going what I minor still on in has a goal I as of seven list but

Chris Concannon

manual opportunity market Open experiencing and talked from forming that's side and lot you a need know I just about we Trading phenomenal price. assistance a Well, largely of as electronic a the about market, that a the transformation has think trading opportunity what more they been much is of buy just a

that's that types can an and So foreign important seen the when I've equity area to the transformations both there's think we the platform, help. and experience point you think market Open on things come they back. these clients know Trading, them exchange that think enhancements I user in the Open Rick’s as that the needs and execute order market I continue about quality, execution their trading Trading to to trade I follow just as well when on end helps activity to

like you of a kind to adding your keep had diet. you it's once and So Chick-fil-A, more more one eating

Operator

Please Alex Our next Blostein from Goldman comes from Sachs. question ahead. go

Alex Blostein

around distribution high yield. plan at question especially A

you participants time more of I the also know to some dealers the a last made to moving participation sounds How meaningful with part handful of think switching distribution So it that guys changes from about of within over. should plan But contribution. high and year a market pool liquidity makers like growth your continues is ETF been yield? over has we

Rick McVey

of August we when Xst year, Xst from plan, new August adopted that of had haven't XXXX. We last

had haven’t any migrations. We

the more You’ve high plan. grade that in seen of

now. increasing seeing percentage, Even disclosed flow. tracking also participation the Those with not their anything we’re So the dealers order the in Trading dealers disclosed do on enjoy the are Open right increase platform.

to where not on high bit. it tracking unlike So, around again, and tend swing a grade little there anything we're does

Alex Blostein

around medium-term well. just about market I we as heard expenses guys step then some take uplift and back, on a little thinking picture XXXX growth for between of incremental comments expense how when your growth? bigger a I outlook bit and are gains But you here obviously share versus expense tradeoff And the to guess a with maybe near

Rick McVey

we've operating the margin, we out. increase and It's the crystal talk now at year is in are the our margins at at that continue the beyond now time would had again margins, And tough now’s the we business. the same expand to to it's do yet to investing we so, to ball, hovering with I of address going where view XX% that's least about I at share. table there the XX%, management margins if margins that years new past in leverage running. four invest, term, and are a kind even hires, And and And to market could We're it's– next do market not around means addressable If outcome. tough think anything been heavily and out. or protocols is been the time terrible margins a to look we add to senior Brexit. and look have that and oftentimes near around flat-lined invest out look over in the the if

top come we'll more products, we're It's it's That’s data on through. expansion a see think and line. the we’ll through, supportive, more growing doing. adding I new growing more of bigger where share, the are piece about what is the leverage Trading side. about coming monetizing where and margin conditions Open see market the That's market

Chris Concannon

our of new all mention, just are line. I’ll Chris. it’s Alex, And, grow hires expected to top

Operator

ahead. from from Miller Buckingham. next question Hugh comes go Please Our

Hugh Miller

Just a have question.

the is factor we hit quite in play what versus a terms the rate widening that in a I trading terms Trading, have type deal of a client-to-client seen as You of about think to in does still from seen rate. spread with in scenarios in tightening was trading buying scenario we've growth Open trading? obviously wondering, historically the hit similar guys for between client-to-trade difference versus that or that of selling of

Rick McVey

can't it's rates, bid offer side I been a there's change Hugh, wanted big in whether on side. say overall the or the hit

difference hit wanted this trend through. the the dynamics. higher on rate side. we continued has have is That play versus wanted or offer typically that the bid We to know You side the

that That’s several So, platform. on years, an drives model. trade delivering, in past bid we’re hit more the more of value But rates seen the offer appreciable the the that the executed, better the in, more the over you’ve I a we course, looking side or whether can’t on flow of the get responses price chance side. change order say getting

Hugh Miller

terms platform you bit And seeing of then little channel to dealer the a what you’re XXXX? that talk just of how in the adoption dealer opportunities on and for as you terms see XXXX, in in growth trading, in can about a

Rick McVey

there quarter Sure. dealers. surprise was a during spread by I widening was and level interest one of caught market in fair And fourth that credit by investors interesting take amount because I’ll think quarter. the the reducing of Hugh. But the risk

is the balance a that dealer in the see and of starting breadth So other shed to for flow. nice community. sheet a this attractive I uptick alternative we have for great think order And what is a and liquidity they’re you’re reduce both dealer-initiated we platform is the that And very looking Open on becoming pool risk. liquidity did dealers Trading investors when to dealers see

tested fourth market increase So and they’ve activity, good caused to when like results we that the has environments quarter. them in had had the one especially they’ve the system, in strained that

Hugh Miller

have trading Do to sense overall that QX percentages or would you a what represent the of as historically? in of kind

Tony DeLise

Yes.

activity is pure DXD. the saying you the year-over-year. and And, if have would we our at X% So course, looked in stayed of pure fourth orders market share that’s appreciably what DXD increase quarter Rick level dealer-initiated the around up over in

Hugh Miller

open had in some a I a mentioned, for remarks terms to relative trading trades obviously, benefits wondering from not I And have the correct trading. trading gave for you But there. color open a mentioned in onset prepared point has you're think that I in Thank of was how X.X standpoint. open over that And time the think through dollar roughly as from open is benefit color the the high that? way you guys well I seeing U.S. basis changed grade trading? you of that from you about that

Tony DeLise

around point mentioned the into on So It's every yield and remarks in rough in that just to points, $XXX. put basis terms what basis somewhere number. is average prepared Rick dollar a X.X yes. That's the

was were to yield to you're fourth $X.XX you at high reason million Across jump fourth improvement points quarter. trade that savings or volumes Rick why about in the or per in the That grade the not only the $X,XXX in the fourth or savings basis that do big widening capture X.X closer the and quarter OT the investment environment. undoubtedly in saw cost were price the with just going in up million savings quarter. up more across looking spreads also had OT savings. across board notional about that in you the didn't so And and number. So and per but saw was spreads the a high-yield both the delivering talk where $X,XXX lot each product

Operator

comes William ahead. next from Our question Chris Shutler from Please Blair. go

Chris Shutler

capabilities that amongst Auto-Ex wrong Rick, uptake volumes Auto-Ex So Auto-Ex are both far kind you're so rolled the about but trade or I'm doing a talk I dealers. on maybe this think if Can side me correct on of year that and you you or you ago know so. just or algo stats today any buy and

Rick McVey

but I don't with number in their to we Auto-Ex. as of going It's back the clear Chris trends come we're days as that well growth exact this exact follow-up happy seeing. we'd have with the to attractive that through increases clients in percentage morning you are but a both but of they’re credit the U.S. you and to trades the seen and very happy early percentage be think ready the we the at on in using Europe stats have Auto-Execution sequentially

Chris Shutler

it's then color and And know Trading there side Open I a buy guess of in any buy Trading, Open pretty the I small today that's side percentages to trends? percentage but

Rick McVey

trends in it’s terms been participation pretty on of the and liquidity around a Open that quarter buy of it’s the source side done in running system. still provision in as there that the participating of call it main there wouldn't has orders Open expanded community are Trading through I market calls three coming been and it's the the liquidity volume that is stable Trading side. the know dealer in alternative But are past You have pools small, the buy then It's makers, important

Chris Shutler

And then that was tax a lastly expectations for little rate below again. guide Tony, the

lower kind to longer rate this tax through about normalized us and Just expect you'd think to how the rate? much how enjoy walk tax of

Tony DeLise

by excess If what more XX.X%. and the from a tax XXXX XX%. there XXXX, now remarks tax the items we XX.X%. the these looked was pull of year And and lots the question prepared there benefit. million right I the excess think get right you full income back you're pull that excess the credits mix are guiding tax go to would jurisdiction. to are I that out again if going items a tax to rate around in under what There's And benefits benefit, It's of rate good you're the then tax and said like permanent mid like we're out have $X in shade just rate. things There's discrete that

The second benefits. these like this long What’s look excess the question just how tax last. the part can of for on future

the at of benefits million exercised, where going number, near term XXXXwhat We to when are options That stock when And know vest XXXX when based because expire, XXXX. stock the the of best. tracking it's right of million options $X we to tell into year, sitting timing on around give and now looking excess when to we’re and are timing don't tax $XX also end exercised we’re I'll on million stock price it's the auctions up exact Tough on move, of $X now. you restricted depending but could right this restricted about about when about next year. in coming the that’s same actually be looking will but what the we’re has at

Operator

O'Neill. Sandler go ahead. Repetto from comes Please next from Our Rich question

Rich Repetto

one build also but be that electronic the open-to-all to Trading automated also would side question on for request the to quote do more is, I - if in I to questions though as listen to it's the that, and automated request buy sort promise volumes? the know an side get want for the and of quote. liquidity Open thing here, all you a guess here on really grow buy liquidity follows guess I'll even the to Trading, Open the occurs that execution, move and to have you this to you execution providers, keep it's but someone I referred I short the with I question. And still automated this the the on

Rick McVey

that, first and to that of able that the likely think they're real-time you Open series to ability base that with smallest willing them, is to price a parameters precursor of to now a is being obvious to I where is that transaction the trade tickets they're taking they're a side data be the able without this most execute no this available in intervention. and But buy within with at which the crack first provider. steps responsive to And forward, price the to Trading When take is the setting think is I’ll intervention automated more trading Rich. as manual a of means be take with in the trading credit.

beginning the So, on tools ultimately better equipped opportunities I under pressures. the cost always I well automated system. think tools improve savings what all them make and think They're portfolio be buy-side will in cost as that returns responsive buy-side will is interested matching a is know investment trading this the tremendous multiyear you of in to be by the and those will to transaction

Operator

Our next ahead. from question comes Voigt Kyle KBW. Please go from

Kyle Voigt

follow-up. Just one

plans given support the for pace to wondering different update to grow closer you’ve to just built operational from to on functionality Just I that and an continue the heading growth in the part direction that growth. management standpoint know of But risk maybe of the size we there? kind and volume of an business? open out just the today operational give a are I us was trade rapidly. your clearing you if the

Rick McVey

our benefiting partner pricing are tiered We from settlement with currently.

cost that scenarios evolve five years. But risk our ticket, our that higher increased for in at lower next of three thing process the reviewing daily There ticket stages So, of settlement counts us. earnings. to place down, in and trend with which you're are have strategy. we improve could early is settlements the the seeing long-term level obviously that But the average to we’re of because of that we've a controls, automation over discounts pricing great lots from the settlement benefiting we're of take

opportunities but the specific, there are we there road. down near So term do nothing think in the

Operator

comes question from Raymond go ahead. from James. Patrick Please last O'Shaughnessy Our

Patrick O’Shaughnessy

Curious fourth whether for quarter share last quarter fourth question across Thanks your here. market and taking your were in my share block non-blocks. and blocks gains both about market the

Rick McVey

the pretty share board. gains much across on the were So the market side,

Now, block side, the X% we for up quarter. on ended around the right

XXXX, over If close you percentage up basis, look block point. to over year was to a X% share X full longer close term

than we market high-grade of are You overall up a look little U.S. at overall, it more for all point the X percentage share.

if you you So similar the full the what over look our absolutely, looks longer or market as the look with block growth trend When year. across happens it was And term to of term, trading at span board the overall. share well. longer

So it was pretty much board. across the

Operator

This would back I concludes Q&A like McVey, session. this to turn Chairman ahead. go our closing Rick call time, CEO At the remarks. for and to Please

Rick McVey

joining quarter. for to you to you we us Thank morning talking and this again forward next look

Operator

This ladies Thank for and concludes gentlemen you, program. today's the conference. attending

Good You day. all may disconnect.

MarketAxess (MKTX) 30 Jan 192018 Q4 Earnings call transcript